Nov. 13 (Bloomberg) -- PepsiCo Inc., the world’s second-largest soft-drink maker, opened its largest research center
outside the U.S. in China today, as it seeks to boost sales in
the world’s most populous country and the Asian region.

The facility, on which the company has spent $40 million to
$45 million, will help tailor beverage and snack food brands to
Asian taste buds and develop new products for China and the
region, Purchase, New York-based PepsiCo said in a statement
today.

The soft-drink maker has opened new factories and sought to
expand its distribution footprint in China over the past year to
narrow the gap with market leader Coca-Cola Co. PepsiCo, the
maker of Tropicana juice drinks and Lay’s potato chips,
announced a bottling tie-up with Tingyi (Cayman Islands) Holding
Corp. last November. PepsiCo is seeing market share gains from
the deal, Greater China Chairman Tim Minges said in Shanghai
today, without elaborating.

The new facility in Shanghai is part of PepsiCo’s 2010 plan
to invest $2.5 billion in China in food and beverage businesses
over a three-year period and expand current offerings such as
sour plum flavored Mirinda and Quaker Oats made with wolfberry,
the company said today.

“China is a critical part of our global strategy, our
growth engine and it makes absolute sense that we do as much of
our innovation close to the Chinese consumer and the Asian
consumer on the ground,” Mehmood Khan, PepsiCo’s chief
scientific officer, said at a press briefing in Shanghai today.

Billion-Dollar Investment

Coca-Cola said last year it was investing $4 billion with
its Chinese bottling partners in the world’s second-largest
economy over three years to build more bottling plans, buy
trucks, expand distribution infrastructure and add coolers.

PepsiCo Chief Executive Officer Indra Nooyi is counting on
sales in China and the Asia Pacific to drive earnings in
emerging and developed markets, after group profit growth slowed
last year.

The beverage and soft-drink manufacturer opened its first
drinks plant in China last month with Tingyi, the maker of
“Master Kong”-branded instant noodles and beverages. PepsiCo
also started production at its sixth and latest food
manufacturing facility in Greater China in Wuhan on July 10.

The partnership with Tingyi should help improve PepsiCo’s
margins in its beverage business when the alliance is “up and
running” in 2014, Nooyi told analysts on a conference call last
month.

Under the Tingyi deal, PepsiCo transfers equity interests
in its bottling operations in China to Tingyi beverage
subsidiary Tingyi-Asahi Beverages Holding Co. In exchange
PepsiCo receives a 5 percent stake in Tingyi-Asahi, with an
option to increase that to 20 percent by October 2015.

Market Share

The beverage alliance is designed to boost PepsiCo’s soft-drink market share in China where the Purchase, New York-based
company was the fourth-largest producer with 4.9 percent share
last year. Coca-Cola and Tingyi led sales with 15.8 percent and
13.1 percent of the market in 2011 respectively, data from
London-based researcher Euromonitor International show.

The partnership between PepsiCo and Tingyi would create
China’s largest beverage company, one with a 1.5 to 1.6 relative
market share versus the next largest competitor, 57-year-old
Nooyi has said.

“Between us, we will basically cover the entire country
and have over 70 plants between the two of us in China,” she
said. “So I think going into 2013 and forward, this business is
going to look very, very good.”